Experts say Bermuda has edge as ILS jurisdiction
Bermuda remains the favoured jurisdiction for catastrophe bond issuance, even though there’s now more choice than ever for sponsors with new jurisdictions, notably in Asia, increasingly looking to grow their market share.
This consensus emerged from the sixth Bermuda-focused Artemis Insurance-Linked Securities (ILS) Executive Roundtable, held virtually for the second year in a row due to ongoing pandemic-related restrictions.
Artemis owner and editor in chief Steve Evans summarised: “Bermuda attracted a significant amount of start-up capital in 2020 ahead of expected reinsurance market firming.”
He said that leaders and experts from across the ILS and reinsurance sector agreed that fresh investor and start-up capital should choose Bermuda.
Mr Evans recapped: “Participants highlighted Bermuda’s robust risk transfer infrastructure, adaptive regulatory environment and ability to innovate, and explored what the island must do to ensure it continues to win new business.
“While the pandemic has grabbed the headlines for the past 18 months or so, climate change remains. And as the conversation has intensified, the universe of sustainable and responsible investing has expanded and is now often debated in the ILS space, and our roundtable was no exception.
“Alongside rising ESG demand and also elevated demand from more traditional investors, the longevity of current market conditions was questioned, as was the potential for the trapping of capital from Covid related business interruption uncertainty.”
Meanwhile, Ocorian executive director Sherman Taylor stated: “Bermuda successfully competes by providing high quality, low friction service, while simultaneously keeping the island’s pricing and speed to market highly competitive.
“This is how Bermuda sets itself apart in a crowded global insurance sector. Ultimately, it is Bermuda’s value for money proposition that will keep it in its position as the leading domicile for ILS.”
Tom Johansmeyer, Head of PCS said: “There’s a lot more advantage to Bermuda than just the legal or regulatory benefits. I chose Bermuda because it lives up to its reputation as the ILS community’s hub for collaboration and innovation.
“PCS’s range of new solutions – going back to our first steps into specialty lines loss aggregation in 2017 – all came from Bermuda support.
“The Bermuda market helped us develop our specialty lines methodology (first for PCS Global Marine and Energy), delivered our seed data for large onshore risk losses, and was instrumental in getting loss reporting for Japan and cyber off the ground. And Bermuda transacts – the rest of the world follows.”
He said Bermuda has a history of being a stabilising influence in times of market stress. And new capital deployed on island in the last six months was a sign of increased investor confidence.
He added: “In the interim, we can expect further consolidation and changes to the global insurance landscape. Bermuda’s deep insurance roots, rich talent pool and commitment to innovation provide a sense of confidence to investors, and this is one of the main reasons why newcos and fresh capital continue to look to the jurisdiction.”
Appleby Bermuda Partner Brad Adderley said Bermuda was alone with Solvency II equivalence, NAIC approval and a reinsurance marketplace where deals can get done.
Vantage Chief Financial Officer Aurora Swithenbank said Bermuda was an easy choice to set up her company.
She said, “The pool of underwriting and operational talent on the island is deep. And Bermuda provides this platform within a strong and consistent legal framework supporting capital formation.
“It is the reason why investors are comfortable with the jurisdiction, having done extensive due diligence and having had good historical experiences in Bermuda.
“Bermuda remains the premier jurisdiction for newcos and the hub for ILS capital formation, and on a personal note, I’m thrilled to call Bermuda my new home.”
Lancashire Capital Management chief executive officer Darren Redhead said: “For us at Kinesis/LCM, Bermuda provides an infrastructure/resources in service providers and most important a willingness/understanding from regulators to help you adapt to changing market conditions.”
Horseshoe chief executive officer Kathleen Faries said: “Bermuda is known for being able to balance its robust regulatory framework with being nimble and commercial. This is a very difficult balance especially when you are also a Solvency II regime.
“In addition, many of the other jurisdictions that are competing for this start-up activity appear unable to rival the level of expertise, experience and “plumbing” that Bermuda has built up over the years.”
She said there remains much room for securitisation of risk innovation and Bermuda could, and should, lead on this innovation by leveraging the Digital Asset regulatory framework already adopted in the jurisdiction (DABA).
Richard Lowther, managing partner of Integral ILS, noted the key to Bermuda remaining the domicile of choice for all forms of ILS hinges on remaining competitive in costs, speed to market and attracting and retaining top talent.
Hiscox ILS Portfolio Manager Aaron Garcia pointed out: “Investor capital should look to Bermuda because it is a tried and tested centre of excellence for risk taking.
“Over the past decade, the island has consistently maintained its global reputation as the ‘world’s risk capital’ due to the strong leadership of Bermuda insurers, reinsurers and asset managers, and their ability to work hand in glove with the Bermuda Government and regulators.”